TransCanada sees Keystone environmental review hijacked by activists

TransCanada CEO Russ Girling, who recently met with State Department officials, expressed frustration with the five-year review by US regulators, saying the process for evaluating cross-border energy projects must change. He has stopped giving his investors a time estimate for the Keystone project.

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By LISA LERER and JIM SNYDERBloomberg

TransCanada CEO Russ Girling acknowledged that opponents of
the Keystone XL pipeline have slowed its approval, though he
said his company remains committed to the project.

Theres no question that the noise outside is having
an influence on the process, he said this week, in an
interview in Washington. The project has been hijacked by
activists that are opposed to the development of all fossil
fuels.

Girling, who recently met with State Department officials about
the project, expressed frustration with the five-year review by
US regulators, saying the process for evaluating cross-border
energy projects must change. He said he has stopped giving the
companys investors an estimate of when the approval
process will be complete.

I think we have exhausted everything that could possibly
be asked, he said.

Still, he said TransCanada, which is based in Calgary, would
continue pushing to build the $5.3 billion link between
Albertas oil sands and refineries along the Gulf Coast,
even if President Barack Obama eventually decides against
approving the route. He did not elaborate on what steps the
company would take if the project is rejected.

Nobody is going to pack up their tent and leave, he
said. We will get through these hurdles. The marketplace
will determine whether these projects get done.

Obama made his last public comments about Keystone in June,
saying he would approve the remaining portion of the pipeline
only if it would not significantly exacerbate the problem
of carbon pollution.

Many environmentalists, including some of
the presidents biggest financial donors, have turned the
project into a litmus test on environmental issues. The decision,
they argue, will set the parameters of the energy debate for
years to come and determine Obamas legacy on climate
change.

Even so, Girling said he viewed the presidents comments
as positive, saying that the pipeline would not
increase oil consumption and would displace carbon-intensive heavy crude from
Venezuela or elsewhere.

The pipeline itself has no emissions and theres no way
that building it will cause an increase in consumption,
he said.

Accelerate development

Keystone critics have been very successful in creating
the impression that the pipeline equals emissions, which is what this is all
about, Girling said. He likened the argument to
suggesting that if we stop building roads people will
stop driving. They will just drive on bad roads.

Opponents argue that the pipeline would increase carbon emissions by accelerating the
pace of oil sands development, which releases more greenhouse
gas emissions than the production and refining of more conventional types
of crude.

Tar sands are the dirtiest fuel source of oil, and
Girling knows that investors will flock to Alberta if Keystone
is approved, said Daniel Kessler, a spokesman for
350.org, an environmental group that has led
much of the opposition to the line. So its not just
about this pipeline but instead a larger signal that the tar
sands are open for business if Keystone is
approved.

Previous pipelines built by the company took about two years to
be approved by US authorities. The longer regulators delay a
decision on Keystone, said Girling, the more costs mount for
TransCanada.

$2 billion already invested

The company has $2 billion invested in the project already, he said. Unused
pumps sitting in warehouses and pipes laying on the ground need
to be maintained and labor agreements and construction contracts are coming
due for renegotiation.

We have a very expensive and complicated process of
trying to manage a construction project that should
have finished by now, he said. Its the whole
value chain thats involved.

The lower leg of the line from Cushing, Oklahoma, to the Gulf
Coast, which TransCanada started building earlier because it
didnt require a presidential permit, is 85% complete and
on track to start transporting crude at the end of this year,
the company said. A lateral pipeline to Houston is forecast to
be online in 2014.

Harold Hamm, the CEO of Continental Resources, has said the
northern leg of Keystone thats now under review is no
longer needed with rail making up for a lack of pipelines to
carry oil from the Bakken Field in North Dakota to markets to
the east, west and south.

Asia exports

Canadian oil producers should focus on exporting the bitumen
to Asia and elsewhere as domestic producers negate the need for
oil in the US, Hamm said at a Bloomberg energy conference in
Houston earlier this month.

The Oklahoma City-based Continental is the biggest owner of
drilling leases in the Bakken, and competes with Canadas
oil sands producers among US refiners.

Keystone would have the capacity to deliver 830,000 bpd of
crude, including 100,000 bbl reserved for US producers. Girling
said oil companies operating in the US remain committed to the
project, including Continental.

We havent had any of our shippers drop their
contracts on our project, Girling said. In fact, we
have folks that still want to get on the pipeline. What you are
hearing from producers is we have to get on with our
lives.

Girling said there wasnt anything of material
significance discussed during his meeting with State
Department. The agency has jurisdiction because the project would cross an international
border.

The company would try to address any concerns that may arise,
including safety improvements to reduce the risks of spills, he
said.

We have no issue with adding additional features that
would allow us to be as safe as we possibly can, he said.
That is our primary objective.

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The US is already exporting more oil than it imports for the first time since the 70's. There is no real value to turning to this caustic, spill intensive stuff.

The tar is currently wrapped around the sand, and the that semi solid sludge is mixed with undisclosed chemicals to make it viscous enough to go through the pipe. It's basically like scouring the inside of the pipe 24/7 with sand paper.

Similar pipes already have an exorbitant spill rate, and what's worse, there is no clean up technology for this stuff, especially if it gets into water. Unlike light sweet crude, the sand in this stuff makes it heavier that water, so it sinks immediately and becomes essentially impossible to clean.

Cal Hodge11.05.2013

Two comments:1) Because the tar sands are going to be produced as long as oil costs more than about $50 per barrel greenhouse gas balances should focus on minimizining GHG emissions associated with getting the oil to market. Less GHG is emitted when China's refineries are supplied from the Middle East and Gulf Coast refiners are supplied with Canadian crude. To shutdown Canadian production the Keystone opponents would have to stop using energy and convince enough others to live with them naked in the woods.2) The President has significantly weaked long term National Security. During one of the Oil Crises in the 1970's, Canada tried to shut off the supply of Western Canadian crude oil to one of our Northern Midwest refineries. We stopped delivering the other end of the exchange to Eastern Canada. But what really caused the oil to start flowing to our refinery was that Canada did not have a way to ship the oil East. A swift approval of Keystone would have prevented other Canadian pipeline construction and assured the US of a long term energy supply that is essential to National Security. The President and his advisors obviously flunked economis 101.